Real estate investors are ‘mostly on the sideline’ as buyers return to housing market: Redfin CEO

Redfin CEO Glenn Kelman says there are several reasons for buyers and sellers to be optimistic after the housing market improved in January.

Video transcript

[AUDIO LOGO]

SEANA SMITH: Home prices dropping for the fifth month in a row in November, according to a Case-Shiller report out today, the latest sign that the housing market is still cooling off. But on a yearly basis, those prices are still up, climbing about 9.2% from 2021. Here with an inside look we want to-- on the housing market, we want to bring in Glenn Kelman the CEO of Redfin.

Glenn, it's great to have you here. So let's step back a bit because mortgage rates have come back just a bit since peaking last year right above 7%. The latest data that we've gotten on new home sales, on pending home sales showing some sort of life. What's your assessment of the housing market today? And any reasons to be optimistic?

GLENN KELMAN: Well, there are a few reasons for optimism. We're not out of the woods yet. But the market significantly improved in January. So Redfin, just to establish our credibility, called the top of the market on March 15 of 2022. We said that interest rates would bring the market down. But now we're seeing increased touring activity, more purchase applications, more offers being made over the past few weeks.

It's still down from pandemic highs. But in November, we were off 30%-35%. Now in January, we're only down 15% to 20%. So that's a significant improvement when you look at year over year numbers. And then the purchase applications for the week of January 20 were up, which was a surprise. Pending sales for December also up, a surprise.

So it was a very weak market in Q4. It's significantly better now in January. Time will tell if rates are going to stay down.

DAVE BRIGGS: And to your credit-- and it's good to see you, Glenn. You called the top. So where's the bottom?

GLENN KELMAN: Well, we may have hit one bottom in November. That was definitely the nadir of the current market. But we could fall further if rates go up. Otherwise, there are still plenty of people who want to move to lower-tax states, to more affordable parts of the country.

So I think we need to see this housing boom over the past two years not just as a fad but perhaps unfinished business. There are still millennials coming of home buying age who want to buy a house. And if they can afford it, if rates stay down, I think we'll see some demand come back, not to the pandemic highs, which are crazy and unsustainable, but more to 4 and 1/2, 5 million units instead of the lowest we saw in Q4, which were closer to an annualized rate of 4 million units.

DAVE BRIGGS: What are your agents telling you in terms of increasing activity?

GLENN KELMAN: Well, some of our agents are seeing offer deadlines for the first time in agent-only listing remarks. We're starting to see bidding wars for really well-priced homes. It is still very hard to sell a condo in the urban core. But if you go out to the suburbs and you can find a house for under $500,000, those are in high demand.

Investors used to bid for those properties and blow out our customers. The investors are mostly on the sideline right now. So people are starting to creep back into the market. There are a few places where we've seen 10, 20 offers on a home, which was absolutely out of the question in the fourth quarter.

SEANA SMITH: Glenn, where are you seeing those bidding wars? Is it specific regions, or is it strictly just housing price-based?

GLENN KELMAN: Well, some of it is just that the seller has got to move, and they've listed the property very low. But it is more popular in the suburbs. It is more popular for single family homes and under $500,000. That's the sweet spot.

I wouldn't say it's the norm. It is still the exception. But it was absolutely unheard of two months ago. So to have the market come back at all is a real change. I have something in my throat. I can't help myself.

DAVE BRIGGS: Go ahead, take a little cough. You got it?

GLENN KELMAN: Yeah, I'm ready.

[LAUGHTER]

DAVE BRIGGS: So at what point, Glenn, do you think mortgage rates begin to flatten out? And is that enough to truly unthaw this market? Where will they bottom first?

GLENN KELMAN: Well, rates were up at 7%. And now they're down to about 6%. We're seeing some clients get a loan that starts with a 5% or a 5% on the rate. But rates can go back up very easily. There are very mixed signals on inflation right now.

Your previous guest was just talking about what the Fed is going to do over the next 24 hours. So we're all sitting here going-- [ANXIOUS SOUNDS] to try to figure out whether it's going to go up or down.

DAVE BRIGGS: Glenn, an interesting story in "CNN Money" yesterday about agents across the country using ChatGPT for various functions, including writing their listings, even legal documents. Have you seen that trend among your agents?

GLENN KELMAN: We have. So some of our agents are using this technology to follow up with customers. Not all the people who go into real estate are William Shakespeare. And so they struggle with just composing an email that's grammatically correct. And if you give ChatGPT just a few facts about what's going on with this customer, you get a nice email on the other side.

So I think ChatGPT is going to change online marketing just generally. More people are going to use it to create content when they're not good writers themselves. They're just like my fifth grader who's trying to figure out how to get a term paper done.

SEANA SMITH: I was going to say, is that your fifth grader-- who's in the pictures behind you?

GLENN KELMAN: Yeah, that's one of them! That's one of them.

SEANA SMITH: There we go. We love it. We love it. Glenn, it was great to have you on the show. We hope you come back, Glenn Kelman, CEO of Redfin. Thanks so much.